EBay parlayed new platform enhancements into first-quarter momentum, though not quite enough to shake concerns about growth trends lagging industry peers. To be sure, there was a lot to like from the quarter, including modest acceleration in active users (up 4% to 169 million), constant-currency marketplace GMV growth of 5% (including contribution from both B2C and C2C transactions, the latter of which underpins our narrow moat rating), and constant-currency revenue growth of 7%. We attribute these trends to new user experiences backed by new structured data/AI investments, mobile platform upgrades, and reactivation/new user adoption (skewing more toward women and younger consumers). We believe this momentum will carry into the back half of the year, owing to a new home page, a more aggressive brand campaign, new delivery speed search functionality, and adoption of promoted listing advertising on the platform for sellers, not to mention easier comparisons for StubHub and classifieds.

With the solid start to the year and the back-half tailwinds, we're buying more into eBay's 2017 outlook. We've plan to adjust our model to the high end of its organic revenue growth guidance of 6%-8% (implying $9.3 billion-$9.5 billion), just above the midpoint of its operating margin (29%-31%) and adjusted EPS forecasts ($1.98-$2.03) due to technology investments, brand marketing, and promotional activity. Over the next five years, we assume average annual revenue growth of 4% and operating margins of 32%, though site enhancements coupled with traditional retailers looking for greater online distribution and new international opportunities (including the Flipkart partnership in India) could set the stage for upside.

Based on greater near-term optimism and tax reform adjustments, we're planning to add a few dollars to our $30 fair value estimate. While we find eBay to be an attractive capital-allocation story, we'd prefer a wider margin of safety before adding to positions.

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